Amid one of the wildest years in geopolitical history, when stock market volatility is knuckle-dragging at all-time lows, a Tabb Group report notes a three-year low in equity trading volume. While volatility reduction is a headline in 2017, there was an odd divergence in August that was among several nuanced reasons for the stock trading volume drop, Tabb Group’s Valerie Bogard noted. Higher volatility normally correlates to higher stock trading volume, but that didn’t happen in August, as a passive trend may be at play along with idiosyncratic differentials.

In August, average daily trading volume dropped 2% on a month-over-month basis to 5.9 billion shares. Trade size, used in certain circles as an indicator of institutional activity, was the lowest since February 2016 as off-exchange market share dropped to 37.1% form 37.4%, pointing to a trend.

The drop in stock trading volume was the lowest in three years and took place during a month in which volatility actually increased on a month-over-month basis. The CBOE VIX index average close, for instance, increased to 12, up from 10.3 in July. The August VIX average close was the highest level in 2017 and started the month near 10.09. It then spiked above 15 August 10 and 17 on geopolitical concerns primarily emanating out of North Korea. The VIX is trading under 10 on Friday.

While higher volatility is correlated with higher stock trading volume, it takes a look at previous years to understand the difference.

Bogard notes that while volume typically drops during the summer months, several “aberrations” from 2015 and 2016 are playing into the year over year calculation data. In 2015, there was significant volume on August 24th, driven by China’s devaluation of the yuan. This was also a month in which the S&P 500 dropped 160 points from 2091 to 1931, for a 7.6% loss. August 2016 saw higher volumes driven by the Brexit vote in June and the upcoming US elections, she said. This resulted in August 2017 volumes being the lowest since August 2014 largely due to the aberrations of the previous years.

During the month, NASDAQ captured 14.1 percent market share of the exchange traded volume, while the New York Stock Exchange followed with 12.9%. The NYSE’s ARCA exchange gathered 9.4% of volume. EDGX was at 6.6%, BATS BZX was at 6.3% and BATS BYX was at 5.1%. Notable IEX garnered 2.2% of volume while the tiny CHX exchange, the target of a Chinese takeover bid, only managed 0.4% of exchange traded volume.

Bogard is closely watching is continued deterioration in trading volume of Alternative Trading Systems (ATS), more commonly known as “Dark Pools.” Volume on these stock trading platforms in the second quarter has been the lowest since such data became available in 2014 as there has been a “struggle to gain market share.” She points to the recent spate of mergers and acquisitions, most recently culminated through Virtu’s $1.4 billion deal to acquire Knight Capital Group, as a sign that an industry shakeup is underway.  She said dark pools are increasingly having difficulty differentiating themselves, particularly as passive investing stock trading volume.

Virtu’s Acknowledge EQ platform traded 50 million shares on an average day in August. The top ATS trading platform was UBS, trading 144 million on average per day, followed by Citadel Connect, trading 76 million.

Another trend on Bogard’s radar is the move from active to passive investing. She notes that volume at the close has been increasing as passive ETFs adjust positioning at the end of the trading day. This has reduced liquidity during the middle of the day, creating a momentum effect. “When volume moves to the end of the day, it begets more volume at the end of the day,” she said.